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US manufacturing activity slumps, construction spending falls

Mon, Jan 04, 2016 - 11:50 PM

[NEW YORK] The US manufacturing sector contracted further in December, as the impact of a stronger US dollar undermined export profitability, while US construction spending fell for the first time in nearly 1-1/2 years in November, suggesting only moderate economic growth in the fourth quarter of 2105.

The US Institute for Supply Management (ISM) said its index of national factory activity fell to 48.2 from 48.6 in November and is now at its lowest level since June 2009.

A reading above 50 indicates expansion in the manufacturing sector and a reading below 50 indicates contraction. The reading was just below expectations of 49 from a Reuters poll of 80 economists.

The employment index fell to 48.1 from 51.3 a month earlier. Expectations called for a reading of 50.

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Markit's purchasing managers' index (PMI) fell to 51.2 from 52.8 in November, the lowest since October 2012.

The new orders subcomponent fell to 50.2 from 53.1, the lowest since Sept 2009.

US construction spending fell for the first time in nearly 1-1/2 years in November as a drop in nonresidential investment offset an increase in housing activity.

Construction spending slipped 0.4 per cent, the first and also biggest drop since June 2014, after a downwardly revised 0.3 per cent gain in October, the Commerce Department said on Monday.

The government revised construction data from January 2005 through October 2015 because of a "processing error in the tabulation of data." The revisions, which showed construction spending was not as strong as previously reported for much of 2015, could prompt economists to lower their fourth-quarter gross domestic product estimates.

Growth estimates are currently hovering below a 2.0 per cent annual pace. The economy expanded at a 2.0 per cent rate in the third quarter. Economists polled by Reuters had forecast construction spending rising 0.6 per cent in November after a previously reported 1.0 per cent increase in October.

Construction outlays were up 10.5 per cent compared to November of last year. Construction spending in November was held down by a 0.8 per cent drop in nonresidential construction. Outlays on residential construction rose 0.2 per cent.

Public construction outlays declined 1.0 per cent. Spending on state and local government construction projects, which is the largest portion of the public sector segment, slipped 0.4 per cent. Federal government outlays tumbled 7.2 per cent.